☕️ China's Stimulus Sparks Mining Rally, But ASX Still Dips

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Welcome to Equity Espresso’s Market Recap.

The Australian share market experienced a slight dip on Tuesday, with the S&P/ASX 200 Index closing down 0.1% at 8,142.0 points. The decline was primarily driven by falls in major banks and supermarket giants, particularly Woolworths (-2.93%) and Coles (-3.01%), whose shares fell again following accusations of false discount claims by regulators.

The negative impact was partially offset by a strong rally in Mining (+2.43%) stocks, buoyed by China's announcement of stimulus measures to meet its 5% growth target. More on that below ⬇️ 

Investors were keenly focused on the Reserve Bank of Australia's (RBA) decision to maintain the cash rate at 4.35%. The RBA resisted the trend of other major central banks loosening monetary policy. The board reiterated its stance of not ruling out any future actions but emphasised the need for policy to remain restrictive until inflation aligns sustainably with target ranges.

The People's Bank of China (PBOC) has announced a comprehensive stimulus package to boost the economy and address concerns about meeting the 5% growth target. This move, the largest since the pandemic, comes in response to weak economic data and the start of monetary easing in the U.S.

Key measures include:

• Cutting the reserve requirement ratio (RRR) by 50 basis points

• Lowering the seven-day reverse repurchase rate to 1.5% from 1.7%

• Reducing existing mortgage loan rates by an average of 50 basis points

• Cutting the minimum down payment for second homes to 15% from 25%

• Introducing new tools to boost the capital market, including a 500 billion yuan swap program and 300 billion yuan in cheap PBOC loans for share purchases

Company News

• Cettire (+78.95%) was the big mover today after completing its FY24 audit process and publishing its annual report with no changes to its revenue policy. Auditor Grant Thornton accepted Cettire's classification as a principal and not an agent in drop-shipping transactions. The company received an unqualified opinion from the auditor.

  Light & Wonder's (-18.42%) shares plummeted following a legal defeat against Aristocrat Leisure in a U.S. court case over a dragon-themed pokies game. The company plans to appeal the preliminary injunction ordered by the Nevada District Court. Aristocrat, Australia's largest poker machine maker, had sued Light & Wonder in March, alleging misuse of trade secrets to copy its popular 'Dragon Link' game.

• Tuas (+13.98%) shares rose after the company reported strong FY24 results, with subscriber growth of 28.6% to 1.05 million and revenue up 36% to $117.1 million. EBITDA increased 60% to $49.7 million, with margins improving to 42%. The company's focus on diverse plan offerings and 5G expansion contributed to the positive results. Tuas also noted progress in its fibre broadband initiative, serving up to 1.6 million homes.

Wall Street

U.S. stocks closed modestly higher on Monday, with the Dow Jones rising 0.15%, the S&P 500 gaining 0.28%, and the Nasdaq up 0.14%. This cautious optimism followed the Federal Reserve's recent interest rate cut as investors assessed whether a new trend would develop in the coming week.

Energy stocks led the gains, rising 1.31%, while eight of eleven S&P 500 sectors closed higher. Among growth stocks sensitive to interest rates, Tesla saw a significant jump of 4.65%, and Meta Platforms rose 0.6% following a price target increase from Citigroup.

As indicated by the CME Group's FedWatch tool, traders’ expectations initially favoured a larger cut from the Federal Reserve at the November meeting. This sentiment was partly influenced by Fed Governor Christopher Waller's comments suggesting that upcoming inflation data could fall below the Fed's 2.0% target, potentially setting the stage for further monetary policy adjustments.

Defence contractor AeroVironment saw its shares surge 11.9% following the U.S. Army's decision to lift a stop work order on a $990 million contract. This significant uptick marks the stock's largest single-day gain since August 28, when it previously jumped 9%.

S&P500 Sector Performance

Economic Data

• Japan’s Services PMI rose to 53.9 in September 2024 from a final 53.7 in the prior month. It was the third straight month of increases in the service sector and the strongest pace since April.

• Japan’s Manufacturing PMI declined to 49.6 in September 2024 from a final 49.8 in the previous month and compared to market estimates of 49.9, pointing to the third straight month of contraction in factory activity.

• U.S. Manufacturing PMI fell to 47.0 in September 2024 from 47.9 in August, below market expectations of a rise to 48.5. This marks the third consecutive month of contraction in US factory activity.

• U.S. Services PMI eased to 55.4 in September 2024, slightly surpassing market expectations of 55.3 and down from 55.7 in August, but still capping off the strongest quarter since early 2022.

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Quick Singles

🌎️ Around The Globe

• Blackstone is selling G6 Hospitality, which includes its Motel 6 and Studio 6 brands, to India’s Oravel Stays, the parent company of the Oyo brand, for $525 million. The all-cash deal, expected to close in Q4, supports Oyo's U.S. expansion plans. Oyo operates over 320 hotels across 35 states and aims to add 250 more in 2024.

• Jony Ive and OpenAI's Sam Altman are collaborating on a new AI-powered device that aims to provide a less disruptive computing experience than smartphones. The project, led by Ive's LoveFrom with ex-Apple executives, has secured funding and plans to raise $1 billion by year-end.

• Microsoft has partnered with Constellation Energy to purchase power from the revived Three Mile Island Unit 1 nuclear plant for its data centres. Constellation will invest $1.6 billion to restart the 835-megawatt reactor by 2028. Microsoft has committed to buying all its power for 20 years.

• The U.S. Commerce Department is proposing a ban on Chinese software and hardware in connected and autonomous vehicles operating on American roads, citing national security concerns. This move stems from the Biden administration's worries about Chinese companies collecting data on U.S. drivers and infrastructure.

• Social Media platform X will comply with a Brazilian court order after being blocked in the country for three weeks. The social media company's lawyers stated in a Friday night filing that they have met Justice Alexandre de Moraes's demands by appointing a legal representative in Brazil, paying fines, and removing specific accounts from the platform.

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*1-year, 3-year and 5-year returns are calculated as of August 31 2024.

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